New Bayer chief plans a radically different style to cut bureaucracy

Bayer’s new chief executive Bill Anderson is preparing a radical crackdown on internal bureaucracy, aiming to give scientists and operative managers more say in making the 159-year old Aspirin-to-glyphosate conglomerate more innovative and efficient.

Anderson joined Bayer in April and formally became CEO this month. His appointment followed pressure from shareholders who have been calling for a break up of the group, struggling to contain the continued impact its $63bn takeover of US crops group Monsanto in 2016.

Days after he joined, Anderson said he would consider all options. Two weeks in as CEO, the former head of Roche’s pharma division and ex-chief of its US biotech group Genentech, declined to elaborate on potential structural changes for the multi-headed group. “I hate to tell you more than I know”, he tells the Financial Times.

Instead, at the company’s headquarters in Leverkusen in north-west Germany, he lays out plans to empower staff with a “radically different approach to how our work is done, how resources are allocated, how budgets are determined”.

Anderson said that he wanted “every person at Bayer to have the same level of impact, fulfilment and accomplishment as a sole proprietor” who does not have to deal with any internal red tape.

To achieve this, he wants to axe internal bureaucracy and make individual employees more accountable. He added that this was not about job cuts but a better way of organising work.

With 101,000 employees and €50.7bn in revenue, Bayer is one of Europe’s largest corporate juggernauts, owning 354 consolidated companies in 83 countries. They produce prescription drugs against cancer, heart disease and other illness, over-the-counter healthcare products like Bepanthen cream as well as seeds and herbicides for farmers.

The company has been reeling from the billions in debt it took on to acquire Monsanto and the mounting costs around the crop company’s weedkiller glyphosate litigation cases. Bayer shares, trading at around €52, are now half of what they were in 2016 just before the rumours about the transaction started to circulate, compared to the wider German stock market, which is up by a quarter.

Anderson wants managers to overcome the traditional top-down approach and allow a team to develop a life of its own.

He likes to compare the situation of senior managers with that of the astronaut in Stanley Kubrick’s “2001 — A Space Odyssey”. In the science fiction movie, the scientists aboard a spaceship gradually find out that the computer had taken over the mission.

In one of his first meetings with Bayer managers, Anderson played a clip from the film. His message was that “the astronaut is us, and we are no longer in control” but at the same time, the system “often is fundamentally flawed”.

He notes surveys typically show staff at large companies say they can realise only 30 to 50 per cent of their potential as they are held back by cumbersome rules and decision-making processes.

“In large companies — Bayer is not unique in this in any way — the people who are making the decisions are often not the people who are have the level of closeness to the decision that you would desire,” Anderson said, adding “the world pretty much just settles for that but . . . it’s not very good.”

He also wants to “kill budgets” to help scientists and team leaders “drive medical innovation, to thrill customers and to make good use of company resources” by responsibly spending corporate resources.

Successfully implemented at the helm of Genentech, this rid the months-long process to allocate budgets and freed up funds to be spent on innovation. “I’ve seen it before. Basically it’s an unstoppable force once you get it going.”

In the first year after budgets were abolished at Genentech, spending “actually went down,” he said, arguing that bad incentives to spend unnecessary resources at the year-end to secure next year’s budget were eliminated. At Roche, it freed up some $3bn a year that could be spent on innovation.

Anderson rejects the idea that abolishing traditional budgets creates a “free for all” noting that there are approval procedures in place. Staff are held accountable by justifying their spending and resource needs in front of other team leaders.

“You have a whole different conversation because they’re all peers, and they all know,” when a colleague starts to overplay their achievements or needs, he said. “You can fool your boss but you cannot fool your peers,” and senior executives often allocate budgets based on “subjective factors like how good that person was at persuading them,” he said.

Current Genentech chief executive Alexander Hardy, who worked with Anderson at the biotech group, describes him as “a groundbreaking visionary and dogged problem-solver”.

Anderson’s key idea is that “decisions are made by the people who are best placed to make them, not by the boss”.

He stresses there was no single “magic bullet” but change required “experiments” and the input of many different employees. “I’m not going to come here and tell everybody they’re going to do this. We’re going to do things differently, but it’s not going to be the ‘Bill Show’.”